How Are Demand Response (DR) Programs Administered??

Administration of DR programs

Administration of demand response programs occurs at the utility or independent system operator (iso) level[1]. Utilities run these programs for the benefit of their RTO, or ISO to promote grid reliability and for other reasons.  They are usually (but not always) required to offer these programs by their overseeing authority, the public utility commission.  Aggregators function within these boundaries.  That is, at times utilities set up particular programs that the aggregators can participate in, but they are subject to program constraints like any other participant.  The only difference between joining with the aggregator and the utility is the level of service and support one receives.  In all other respects, they are the same programs and thus, the same rules. A confusing extra feature of this arrangement is that at times aggregators will bundle several distinct program options under one brand one and market it as a different program to the end-use customer[2].  It is worth noting that generally PUCs have no authority over the contract between the aggregator and the end use customer, the source of much of the jurisdictional confusion around aggregators.

Demand Response (DR) Program Classifications

Types of DR Programs

The traditional dichotomy is between incentive-based DR programs and time and price-based programs(Albadi & El-Saadany, 2008).For the price-based programs, the load reduction occurs because prices have reached a pre-specified high level.  Incentive programs require the customer to shed load in response to a system-wide events. in reality, the line between these programs is often blurry.

Among the incentive programs, market-based programs are growing in popularitydue to a recent high-profile FERC ruling [3].  FERC has mandated that wholesale energy market operators pay locational marginal price (LMP)[4] to demand response resources, effectively paying them as if they were analogous to traditional generating units such as natural gas plants.This has been seen as a boon to the demand response aggregators who can now enlist customers in DR programs and bid them load directly into wholesale markets, as opposed to being a middleman between utilities and customers.  It has also encouraged a host of programs where customers can bid their loads in themselves.  There will be more discussion of this ruling very soon.